Friday 24 June 2016

Cuban Missile Crisis. Sense will prevail.

Humankind has a natural inclination to avoid pain. If UK votes to leave and it threatens other countries' economic stability then other countries will do what they can to alleviate it.

There is punishment and there is mutually assured destruction. It's much like the cold war. Threats are made but when fingers are on buttons they will waiver and deplomacy will take over to avoid net sufferance.

I cannot believe that the EU, whose behaviour has constantly displayed a 'whatever it takes' response to survival, would let a Brexit vote paint themselves into a corner of sufferance.

As any parent knows, threats of punishment before the action are a different matter once the action has taken place. Negotiation and compromise is still most likely.

If we seriously think that,as the FT has suggested, the likes of the Mexican Peso's fate is in the balance of Brexit then something is messed up. Shock is one thing but reality is another. The tertiary correlations should be faded.

Look at this as the Cuban missile crisis. Sense will prevail to protect the majority. If you don't believe me look at the response to the global financial crisis. The masses were forgiven their debt to preserve society.

Position update.. started trimming GBP 1.4000 Sept puts. Watching FTSE to buy. Will buy EM such as MXN that is being slammed on tertiary Brexit arguments. Running short BTPs as that is going to be a slower burn Euro woe.

6 comments:

Anonymous said...

Well played sir

checkmate said...

I recall a poster informing me that "life is not chess". Having read your posts I suspect that you wouldn't be so foolish has to make the same claim that behavioural strategy does not play a large part in many transactions that make up day to day behaviour we know has 'life'.
Well done on maintaining a rational view of events and their many possible outcomes.

Eddie said...

I cannot believe that the EU, whose behaviour has constantly displayed a 'whatever it takes' response to survival, would let a Brexit vote paint themselves into a corner of sufferance.

I'm not so sure. Think about Greece. The EU has every reason (actually it is the best strategy to ensure long-term survival imho) to play hardball and make sure nobody else comes up with a similar idea. So the British might have to suffer quite a bit to teach Wilders, Le Pen and friends a lesson. This is politics after all.

Polemic said...

Hi Eddie, I meant that EU woild do everything it can to protect itself from pain. As you say greece is a good example. Sure they will want to use UK as an example to other potentisl deserters but if that punishment includes erioysly damaging themselves they will look for a solution with optimal benefits vs facesaving

Al said...

I think you are right Polemic. There will be some distasteful posturing at the outset by tinpoits like Juncker, but at the end of the day, those with real power will not want to hurt their peoples.

It is quite notable though how emollient Merkel has been thus far. You may say it is because of German exports, but perhaps she sees a future possible path for Germany if only they could find a way.

Eddie said...

Hi Polemic, in this case I got you wrong.

The latest posturing by Merkel and Valls gives an idea of things to come. Merkel says we need to give the British time to think (trying to protect her exports), Valls says kick 'em out before the day is gone (aiming for ever closer union and better access to German coffers). Let's see what Monday brings (except for some nice gaps... if I just knew the direction).